Construction, Mining Equipment Volumes May Drop This Fiscal: ICRA
This drop is following two consecutive years of strong growth of 26% in FY'23 and 24% in FY'24.
Rating agency ICRA on Thursday said the volumes of domestic mining and the construction equipment industry may drop in the current financial year on account of a slowdown in the new project orders amidst Lok Sabha elections and monsoon-related impact on construction activities.
"ICRA expects FY2025 to see a 12-15% year-on-year decline (which translates into volumes of 1.14-1.18 lakh units)," the rating agency said in a statement.
This drop is following two consecutive years of strong growth of 26% in FY23 and 24% in FY24.
The reversal in this growth trend will be driven by a slowdown in the new project award activity in Q4 FY2024 and Q1 FY2025, as the Model Code of Conduct will remain in force during the Parliamentary Elections in April-May 2024 (till the announcement of results on June 4, 2024).
"Additionally, the aggregate revenues for ICRA's sample set companies are expected to contract by 9-12% and operating margins by 100-150 basis points in FY2025," the statement said.
The re-election push by the government on project execution led to a strong demand momentum for the domestic mining and construction industry in the last two years.
However, with a likely disruption in project award activity for two consecutive quarters—in the fourth quarter of FY24 and first quarter of FY25, amidst the Lok Sabha elections and monsoon-related impact on construction activities in the second quarter, the first half of FY25 is likely to see a moderation in sales, Ritu Goswami, sector head, corporate ratings, ICRA said.